Cartel stability under quality differentiation

Iwan Bos, Marco A. Marini

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

This note considers cartel stability when the cartelized products are vertically differentiated. If market shares are maintained at pre-collusive levels, then the firm with the lowest competitive price-cost margin has the strongest incentive to deviate from the collusive agreement. The lowest-quality supplier has the tightest incentive constraint when the difference in unit production costs is sufficiently small. (C) 2018 Elsevier B.V. All rights reserved.

Original languageEnglish
Article number174
Pages (from-to)70-73
Number of pages4
JournalEconomics Letters
Volume174
DOIs
Publication statusPublished - Jan 2019

Keywords

  • Cartel stability
  • Collusion
  • Vertical differentiation
  • PRICE-COMPETITION

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